Some others wondered whether the increased price margin was reasonable or petrol businesses just joined hands to cash in on their adjustment scheme.

At a recent meeting in Hanoi, the Ministry of Trade and the Ministry of Finance allowed domestic petrol businesses to fix petrol retail prices in line with the market mechanism. Accordingly, based on import prices and tax, fees and surcharges, petrol businesses are allowed to offer petrol retail prices to ensure their operations and reinvestment activities. The State will approve or disapprove the new price levels based on global oil price updates, import tax and transport fees. In case of disapproval, the State will ask businesses to adjust the offered prices to a reasonable level.

At a recent press briefing in Hanoi, Nguyen Tien Thoa, head of the Price Management Department under the Ministry of Finance, also affirmed that “the State will only intervene if the selling prices offered by petrol businesses are unreasonable.”

Consumers and petrol consuming businesses wondered why all petrol businesses decided to increase their retail prices by an additional VND800 at the same time. Trade Minister Truong Dinh Tuyen explained that the margin had been agreed upon by all petrol businesses after consultations with the Ministry of Trade.

Under an agreement reached between the Ministry of Trade, the Ministry of Finance and petrol businesses, the additional increase does not exceed VND1,000/litre each time and the above mentioned level can be adjusted several times to avoid psychological implications on consumers. In addition, petrol businesses are not allowed to raise retail prices twice within three months if the additional increase reaches its peak (VND1,000/litre). 

Domestic petrol businesses intended to increase retail prices by additional VND1,000/litre due to a sharp rise in global petrol prices plus transport fees, import tax and other surcharges. But they agreed to increase by VND800/litre after the Vietnam Petrol Import-Export Corporation (Petrolimex) that makes up more than 60 percent of the country’s petrol and gas market share had offered the level.

According to Trade Minister Tuyen, the agreement reached by petrol businesses benefited consumers and petrol-consuming businesses though they claimed that they were still making a loss. They said the average retail price should have been around VND13,000/litre instead of VND11,800 at present. 

As a result, the recent adjustment in petrol prices is acceptable because it belongs to the authorised margin. Consumers should get acquainted with and accept new price mechanisms as businesses are allowed to set their own suitable prices at a certain level. Consumers’ interests are still guaranteed by the State that can control petrol retail prices indirectly by adjusting petrol import tax.

However, the question is that what will happen if the price adjustment amounts to a level that businesses can hardly make a loss any more in the process. What options will consumers have by that time? Petrol businesses have confirmed that this situation cannot happen. Nguyen Dinh Anh, an official from the Financial Research Institute and many other experts said that new mechanisms for petrol prices have not yet paid off in a competitive manner.

Currently, Vietnam has only 11 businesses permitted to import oil and petrol, so it is unlikely to have fierce competition among businesses in order to attract more consumers. The major trend is that businesses will compromise to increase or reduce prices. However, equality among businesses should be taken into account in the market economy. This means that many private petrol businesses want to get involved in petrol import-export activities to create more options for consumers.